Hospitality is haemorrhaging talent after tax rises

Economic difficulties have continued into 2025, with workplace redundancies and fewer job opportunities hitting virtually every UK sector.

And it doesn’t show signs of slowing down either, as research from QuickBooks has revealed a significant decline in small business vacancies. Businesses based in accommodation and food services are the most affected.

The findings are hardly surprising. Following increases in employer National Insurance Contributions (NICs) and changes to the Skilled Worker Visa, the UK economy has left many hospitality businesses struggling to hire and maintain staff.

And even with Government initiatives to help soften the blow, the risk of future tax increases in this year’s Autumn budget could leave businesses even worse off than they were before.

Grim outlook for hospitality hiring

High staff turnover and seasonal demand have traditionally created challenges for hospitality firms to retain a strong workforce throughout the year.

But the recent spikes in employer costs, caused by April’s NIC rise, have added pressure. Many companies are struggling to afford staff wages, with some being forced to cut job roles altogether to stay afloat. 

Research by QuickBooks’ Small Business Index reveals that 49,600 jobs have been lost since April 2025, when the increases in NICs were first enforced. Unsurprisingly, it found that businesses in the accommodation and food service industries were hit hardest by the changes, with a total loss of 21,800 vacancies. 

As well as job cuts, a survey reported by UK Hospitality found that 63% of businesses have had to reduce hours for available staff.

The issue is having an impact on the business outlook. At the start of this year, businesses in the hospitality sector told us they had the lowest level of optimism for 2025. 

In a joint statement published by the British Institute of Innkeeping (BII), various UK hospitality trade bodies said: “Hospitality is vital to the UK economy but is under threat from ongoing cost rises, which the April increases have only exacerbated.

“Jobs are being lost, livelihoods are under threat, communities are set to lose precious assets, and consumers are experiencing price rises when wallets are already feeling the pinch.”

Why else is the hospitality industry losing staff?

These latest job cuts are exacerbating existing labour shortages in hospitality. Historically, the industry has been a low-paid sector. Partly this is due to it having a large number of part-time workers and students. 

But while this has been a cost-effective approach for employers, only 56% of employees feel satisfied with their pay. And unfortunately, due to NICs further harming business profit margins, staff aren’t likely to see a substantial pay rise anytime soon. This is creating an exodus of talent as employees look elsewhere for job roles with more pay opportunities.

To make matters worse, updates to the UK’s Skilled Worker visa now mean that many hospitality-related roles — such as chefs, managers, and bakers — no longer qualify for the visa. This has made it much harder to hire hospitality staff from overseas.

And, with the National Living Wage expected to rise by as much as 65p next year, firms may find themselves forking out even more to hire staff, leading to further job losses.

How is the sector responding?

While this all sounds like doom and gloom, efforts are being made to help hospitality businesses through this difficult economic period.

The “Summer Streets” fund was introduced in June by the Mayor of London, Sadiq Khan, to fund outdoor seating for restaurants, cafes, pubs, and live music venues, and boost revenue during the busy summer months.

Meanwhile, new complaint law proposals announced last month could give pubs and other venues more freedom to extend their opening hours. Under the changes, developers building near existing venues may be required to install soundproofing in new properties.

That being said, there is also the possibility of future tax rises being implemented in the next Autumn budget, which Chancellor Rachel Reeves said she wouldn’t “rule out”. This could risk more job losses and even closure for some businesses.

Commenting on the impact of the previous tax increases, Kate Nicholls, Chair of UK Hospitality, told The Caterer: “Sectors like hospitality are the very sectors you need to create jobs in every part of the UK and for people of all ages, education and background, but hospitality and those working part-time are among the hardest hit by these tax increases.”